Vincent Del Giudice
Bloomberg
March 8, 2008

	In the early stage of a recession, consumers tend to rely on credit cards to see them through the hard times.

U.S. consumer borrowing rose in January as Americans spent twice as much on their credit cards as they did a month earlier.

Consumer credit increased by $6.9 billion to $2.52 trillion, the Fed said today in Washington. In December, credit gained $3.7 billion, less than a previously reported increase of $4.5 billion. The figures don’t include borrowing secured by real estate, such as home-equity loans.

People once dependent on home-equity financing are turning to other forms of short-term financing after the collapse in subprime mortgages made it harder to qualify for loans. Personal income in January rose at a slower pace than inflation, and credit card usage in January rose for a second straight month.

“There’s not much gas left in the tank,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “In the early stage of a recession, consumers tend to rely on credit cards to see them through the hard times.”

Economists had forecast January credit would expand by $7 billion, according to the median of estimates in a Bloomberg News survey.

After adjusting for inflation, spending stalled for a second month in January, increasing concern that the economy is headed for a recession. Consumer purchases account for two- thirds of the economy.

Read entire article